MADISON — Customers of Xcel Energy will see a much smaller increase on electric bills come January after state regulators sided with CUB and voted to block the company’s request to hike its profits.
The Public Service Commission could have gone further in reducing profits, which would have enabled customers to see a decrease on their bills come January. Xcel initially sought an electricity increase of $40.3 million, or 4.8%, but the PSC approved an increase of approximately $1.1 million, or 0.1%. Natural gas distribution rates are projected to go up $5.4 million, or 3.2%.
Spotlight on profits that have been too high for too long: The utility in this case proposed to increase its profit rate, or return on equity, to 10.25% — which would have been higher than any Wisconsin utility has been allowed to earn in recent years.
PSC Chair Rebecca Cameron Valcq said that she considered it “bold” that Xcel sought an increase in profits.
CUB had advocated for a profit rate of 9.3%, which would have saved customers $28.75 million over the next two years. That level would also have made Xcel’s Wisconsin utility more on par with the 9.25% ROE approved this year for Xcel just across the river in Minnesota.
The PSC opted for a smaller reduction, to a return on equity of 9.8%. That rate will save customers about $13.6 million over the next two years.
“The PSC could have gone further, and by cutting profits a bit more they could have enabled Xcel customers to see a decrease on bills come January,” said Tom Content, CUB executive director. “But in bringing down the profits, the PSC sent a signal that setting the profit for utilities is about more than investor interests. It’s about balancing investor interests with those of the customers paying the bills.”
Capping earnings: The PSC voted to prevent the utility from earning excessive profits by keeping in place an earnings sharing mechanism. Xcel has had an earnings cap in place but hadn’t proposed to keep it in effect for 2024-25.
In other key wins for Xcel Energy customers Thursday:
o Divvying up costs between small and large customers as the grid modernizes. In a significant win, the Commission agreed with CUB that how the grid operates hour to hour and over the year should be reflected in how cost increases are divvied up among small customers and big businesses. The grid is changing as more renewables are being installed, and CUB identified a need to update how costs are allocated.
o Shareholders, not customers, should pay for bonuses. The PSC sided with CUB in denying incentive compensation for utility executives and other employees that was connected to benefits for utility shareholders rather than utility customers.
o Expanding EV charging in western Wisconsin. The PSC approved a small program that will see Xcel install four EV chargers in western Wisconsin in the next few years.
However, CUB was disappointed that the Commission decided that COVID-19 costs should be borne solely by customers. CUB had requested that remaining costs linked to the COVID-19 pandemic be shared between Xcel shareholders and utility customers.
The Commission approved a sizable increase in a competitive response rider, an economic development program designed to assist large industrial customers with their affordability challenges.
“Looking forward, we hope this signals that the Commission will support the residential affordability program that’s currently pending,” Content said.
The decisions reached Thursday will be formalized in a written order that the PSC will issue by the end of the year.
The exact size of the official increase for residential and small business customers will be specified once the final impact of all the Commission’s decisions in the case is totaled.
For more information, check out CUB’s Xcel Energy case information on CUB’s Active Cases page.